What You Need to Know
- Over 64% of RIAs failed to complete Form ADV Item 5.L, which would give them previously prohibited marketing opportunities.
- Only 2.3% of firms that completed Item 5.L use testimonials.
- Third-party ratings and reviews will spur the emergence of wealth tech platforms that serve the needs of investors and advisors alike, according to Indyfin.
Some 14,000 RIAs filed a Form ADV amendment with the Securities and Exchange Commission as of March, but 64% of them failed to complete Item 5.L., which would enable them to leverage new marketing opportunities under the new marketing rule, the fintech company Indyfin reported Tuesday.
This demonstrates that the industry is unprepared for the November deadline for compliance, it said.
“What our research has shown is that there is still uncertainty and confusion within firms on how to best utilize the provisions of the rule to best position their firms for growth,” Indyfin’s founder, Akshay Singh, said in a statement.
“The new SEC marketing rule is a once-in-a-generation chance to differentiate themselves and to modernize how advisors can market their firms, particularly when it comes to digital channels, one of the fastest-growing channels available.”
Opportunities Go Begging
Indyfin’s research found that only 2.3% of firms that completed the ADV Item 5.L. use testimonials, even though testimonials are now available for use. Testimonials enable an advisor’s clients to share how the firm is meeting their needs and why they love working with it.
For many other service industries, client testimonials provide the social proof needed to make purchase and partnership decisions, Indyfin said.
In addition, just 2.1% of RIAs in the study that have completed Item 5.L. reported that they use endorsements in marketing their business.
Endorsements are a provision of the SEC’s new marketing rule whereby parties other than clients can review an advisor — a huge opportunity for advisors to differentiate their firms, Indyfin said.